Bumper-to-bumper taxation has heavy costs for businesses, public

Taxes for transit on small businesses have heavy costs for public

No matter where you live, the most popular form of tax is the one someone else pays.

That seems to be the main consultation findings embodied in plans to fund $50-billion in public transit improvements in the Toronto area within the next 25 years. Metrolinx, the region’s transit agency, the provincial government and area municipalities are trial ballooning dozens of new ‘revenue tool’ ideas in the hope of finding ones that politically do the trick.

The problem is, populist politically driven tax policies rarely make sense from an economic development standpoint. And, local governments — the ones so-called “closest to the people” — are the worst culprits. In attempts to shield voters from having to pay for services directly, they prefer to make them pay indirectly, even if those indirect costs are higher. One well-used municipal strategy is to lobby provincial and federal governments to foot the bill. Another is to rely heavily on local businesses. The line of thinking appears to be if businesses pay higher taxes, then ordinary people won’t have to.

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For that reason, depending on the municipality, local businesses property taxes across the country are two to four times higher on dollar-equivalent residential taxes. In reality though, ordinary people pay dearly for high local business taxes. They pay in jobs that don’t get created from businesses that don’t start or are chased away; they pay in constrained wages because businesses’ net operating revenues are squeezed lower; they pay in higher prices on local goods and services; and, they pay in the over-provisioning of public services because the economic pricing signals are distorted.

One Metrolinx tax proposal getting nods from local councils — a tax on business parking spaces — would have this effect.

Only a political argument could imply that a non-residential parking space is a cause of road congestion, while a residential driveway is somehow not. As if $1-billion a year can be collected invisibly or fairly from such a narrow group. At a prospective $365 a spot, major mall owners would see annual bills rise by millions of dollars. Small players too would face thousands of dollars of extra costs simply for having a half-dozen parking spots around the back. For properties developed under the old norms of urban and suburban land economics, fundamentally changing the rules of the game would serve to rob people of their investments.

TransLink, the Vancouver region’s transit agency tried the same approach a few years ago, thinking small business owners would roll over. They severely underestimated the response and were forced to abandon the tax. (It’s interesting that this history lesson is nowhere to be seen in any Metrolinx backgrounders).

There is no doubt an effective transportation network is vital to any large metropolitan area, but it has to be efficient too. Metrolinx says the public must prepare for handling massive economic growth in the region in coming decades. If they and local governments involved miscalculate the funding formula, a not-so-distant likelihood given the precedents, they may end up chasing the economic drivers away — and creating a city not congested enough.